The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA assigns Initial rating to WAPDA Dasu TFC-C

Rating Type Debt Instrument
(19-May-23 )
Action Initial
Long Term AAA
Short Term -
Outlook Stable
Rating Watch -

The Water and Power Development Authority of Pakistan ("WAPDA") has issued the 3rd tranche of TFC on 29-Mar-23. WAPDA will utilize this amount to partially finance the construction of the Dasu hydropower project ("The project" or "Dasu"). Dasu, once completed would become the second-largest hydel project in Pakistan. Dasu is a run of river project on the Indus River located in Dasu Kohistan, Khyber Pakhtunkhwa about 350 KM from Islamabad. The project started in 2017and is expected to be completed in May'27. The project is expected to be completed in two stages, the installed capacity would be 4,320MW (stage-I 2,160MW) and the annual energy which would be produced is 21,485 GWh (Stage-I 12,220 GWh). Stage -I project includes the construction of a hydraulic structure on the Indus River and underground power generation facilities, out of the total land required (5005 acres) for the project 4630 acres have been acquired. The Project would be financed through a mix of WAPDA internally generated cash (15%) and borrowing (85%) i) Long-term (local & foreign) ii) Bonds Issuance (Islamic & Conventional).
The assigned rating of TFC incorporates an unconditional and irrevocable guarantee by the Government of Pakistan (GoP). The guarantee is covering the payment of the total outstanding amount of the TFC and the related profit component. GoP would pay the entire called amount immediately upon receiving a demand notice from the issue agent. Additionally, WAPDA has maintained a debt payment account (DPA) under the exclusive lien of the issue agent. Within the first fifteen days of each month commencing from the Musharaka Contribution Date (as defined in the Musharaka Agreement dated March 29, 2017), WAPDA will deposit an amount equal to 1/6th of the upcoming installment in the DPA. The rating apart from a debt payment and guarantee mechanism recognizes WAPDA's strategic importance as the major hydroelectric power supplier to the country. The Company has generated a topline of ~PKR 37.7bln during 6MFY23 (6MFY22: ~PKR 48.8bln). WAPDA generated a humble bottom line of ~PKR 12.9bln during 6MFY23 (6MFY22: ~PKR 8.8bln). WAPDA generated 32,694GWh electricity in FY22 as per State of Industry report 2022 . WAPDA expects to generate an additional ~8,990MW by the completion of new hydel projects in the next six years.
WAPDA's financial profile draws comfort from strong cash flows. However, it remains dependent on the repayment behavior of the power purchaser. Continued compliance with the predefined covenants of TFCs, including maintenance of DPA would remain critical.

About the Entity
The Pakistan Water and Power Development Authority (WAPDA), was established through an act of parliament in February 1958 (WAPDA Act 1958) for the development and maintenance of water and power resources. WAPDA has 22 projects with a total hydel generation capacity of 9,359MW.

About the Instrument
WAPDA has issued a rated, secured, privately placed WAPDA Dasu TFC-C ("TFC") of PKR 4,235.3mln on 29-Mar-23 to partially finance stage-1 of Dasu Hydropower Project. The TFC has a tenor of 9 years and carries a profit rate of 6MK + 1.45% p.a paid semi-annually in arrears, calculated on a 365 days basis on the outstanding principal amount. TFC will redeem after nineteen equal semi-annual installments amounting to PKR 223mln which commenced from May-23.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.